Actavis is buying Warner Chilcott in an all-stock transaction valued at about $8.5 billion which would create the third-biggest specialty pharmaceutical company in the US.

The new company is expected to be called Actavis PLC and will be incorporated in Ireland, where Warner Chilcott is incorporated.

Warner Chilcott shareholders will own a 23% stake in the new company. They will receive 0.160 shares of the new company for each share they own.

This equals $20.08 per share, which is a 5% premium to Friday's closing price of $19.21.

Actavis Inc shareholders will receive one share of the new company for each share they own at closing.

Both companies' boards unanimously approved the deal, which is expected to close by the end of the year.